"Benjamin was the oldest animal on the farm, and the worst tempered. He seldom talked, and when he did, it was usually to make some cynical remark—for instance, he would say that God had given him a tail to keep the flies off, but that he would sooner have had no tail and no flies." - Animal Farm

Tuesday, September 20, 2011

The Revolution Devours Its Own

Netflix's decision to split its DVD-by-mail and streaming video services into two completely separate companies is... vexing, to say the least:

...What is Reed Hastings smoking? As far as anyone can tell, he seems to have rolled up pages from The Innovator's Dilemma, Clayton Christensen's influential 1997 book about the ways that successful companies die at the hands of upstarts. Christensen, a professor at Harvard Business School, coined the term "disruptive technology," which describes innovations that come out of nowhere to undercut a market leader's dominant position. Christensen cited the way that Digital Equipment, the leader in 1970s-era corporate minicomputers, completely missed the 1980s boom in personal computers. But a better example may be Netflix itself—its all-you-can-eat business model disrupted, and eventually killed, the previously dominant Blockbuster model for movie rentals. Hastings is likely paranoid, then, that Netflix is vulnerable to the same kind of disruption. And that's the logic behind the mail/streaming separation. Hastings would prefer to kill his own golden goose before anyone else beats him to it.

In its own technocratic fashion this brings to mind the image of the Titan Saturn (Cronos, to the Greeks) devouring his children. He did so in order to prevent the same kind of overthrow he led against his father, which famously led to his wife Ops/Rhea substituting a stone for the last of them, Jupiter/Zeus, who grows up to lead a rebellion against the Titans. (God of War 2 summarized it nicely.) Netflix, in announcing the Qwikster split, just swallowed a stone of its own.

CEO Reed Hastings is essentially betting that because streaming technology is "the future," he needs to cut off the DVD-mailing service before it becomes insolvent and obsolete. But their streaming library is underwhelming and best functioned as a compliment to its vast DVD library. It doesn't have enough to justify a subscription on its own. That Qwikster was seemingly named as a nod toward another doomed internet upstart, and with no consideration that the domain name and Twitter handle had already been snapped up, does not bode well.

The net effect of all this, of course, is to anger a customer base already irate with having its monthly rates jacked up. For myself, my movie-watching habits are bad enough that I've had discs sitting for months at a time without getting watched, and my internet connection isn't fast enough to let me watch movies uninterrupted. I'm probably going to cut "Netflix" loose because I can't justify paying for something I can't/won't use, especially when my Amazon Prime membership gives me free access to a sizeable library of streaming films already. I may hold on to Qwikster to get ahold of more obscure titles, but even that's not a certainty. Redbox aside, Netflix has until now dominated the movie rental market; dividing itself and its customer base makes it much more vulnerable now to competition than it was before.

Netflix may have done the Qwikster split in order to get rid of a declining business model, but in doing so they may have hastened their own decline. As with many a revolution before, the insurgent, now established as the leader, can only go down and will resort to dread measures to keep its grip on power. Netflix's anxiety is perfectly understandable, but they should have known what the Greeks and Romans figured out millenia ago, that those who try to escape their fate will only blunder into it the worse.

1 comment:

Qwikster is Netflix biggest down fall and Netflix will start loosing customers quick. I switched to DISH Network's new movies package called Blockbuster movie pass! This allows DISH users to get a one disc at a time rental which includes games, TV shows, movies, and blu-rays. They have over 100,000 titles to choose from and working for DISH Network I can tell you it also allows users to stream 3,000 movies to your TV and 4,000 to your PC.